Carphone climbs on demerger plan, but FTSE drifts ahead of Budget

Carphone Warehouse has climbed more than 5% after confirming it had finally decided to go ahead and split in two.

The company, headed by chief executive Charles Dunstone, said in November it was looking at the possibility of demerging its retail and its telecoms business, and it has now decided to go ahead. It has already sold half its retail business to US group Best Buy. It said the timing depended on reallocating its credit facilities. With the company beating forecasts for new broadband and mobile phone customers in the fourth quarter, as well as upping its forecasts for free cash flow, its shares are 8p better at 135.25p. In a buy note analysts at Daniel Stewart said:

"Overall we see these numbers as strong, beating consensus for broadband adds, despite the deterioration in house moves, and in mobile connections. The key issue of demerger is now, as previously reported, a matter of timing to be determined by the allocation of group credit facilities."

Overall the market is drifting ahead of the all important Budget at lunchtime. The FTSE 100 is up 16.01 points at 4003.47, but all eyes will be on Alistair Darling's speech. Manoj Ladwa, Senior Trader, at ETX Capital said:

"The so-called "Budget for Jobs" will, most probably, reveal some pretty unpalatable public sector borrowing figures. With much debate about the current state of the UK economy the markets are unlikely to take the predicted £180bn public sector borrowing requirement well. For instance, questions will be asked as to whether the UK government can really shift £200bn worth of gilts."

Chris Hossain, Senior Sales Manager, ODL Securities added:

"Soothing words from [US Treasury Secretary] Timothy Geithner eased the markets fears yesterday, but expect us to tread water until release of a much anticipated budget. With our economy at such a crossroads, today could prove to be historic in determining the direction for a whole generation of stock market investment. Global eyes will be centred on Alistair Darling, especially in light of the IMF's recent comments."

Banks have clawed back some ground after yesterday's losses, with Barclays 15.5p better at 214.5p. Royal Bank of Scotland is up 1.5p at 32.1p and Lloyds Banking Group is up 4.7p at 99.7p. The latter was helped by a buy note from UBS, which raised its price target from 100p to 120p. UBS said:

"In our view, Lloyds is one of the few European banks that can say with certainty that they are fully recapitalised. Others may be able to avoid issuing stock but this conclusion is far from being a certainty elsewhere.

"As well as having been recapitalised and de-risked through its involvement in the UK Asset Protection Scheme, Lloyds has, in our view, a balance sheet structure which affords more protection than most from structural margin pressures resulting from the current interest rate environment. An excess of lending over customer deposits and the greater exposure to UK mortgages than peers, one of the fastest repricing asset classes globally means Lloyds is differentiated relative to other banks."

Miners have slipped back along with the copper price. BHP Billiton is down 40p to £13.04 after slightly worse than expected quarterly production figures. Platinum producer Lonmin is 74p lower at £11.96 ahead of its own update due on Thursday.